Chapter 4 CROSS-CUTTING AND NEW ISSUES Subjects that cut across the agreements, and some newer agenda items The WTO’s work is not confined to specific agreements with specific obligations. Member governments also discuss a range of other issues, usually in special com- mittees or working groups. Some are old, some are new to the GATT-WTO system. Some are issues in their own right, some cut across several WTO topics. Some could lead to negotiations. They include: • regional economic groupings • trade and the environment • trade and investment • competition policy • transparency in government procurement • trade “facilitation” (simplifying trade procedures, making trade flow more smoothly through means that go beyond the removal of tariff and non-tariff barriers) • electronic commerce One other topic has been discussed a lot in the WTO from time to time. It is: • trade and labour rights This is not on the WTO’s work agenda, but because it has received a lot of attention, it is included here to clarify the situation. 1. Regionalism: friends or rivals? The European Union, the North American Free Trade Agreement, the Association of Southeast Asian Nations, the South Asian Association for Regional Cooperation, the Common Market of the South (MERCOSUR), the Australia-New Zealand Closer Economic Relations Agreement, and so on. By July 2005, only one WTO member — Mongolia — was not party to a regional trade agreement. The surge in these agreements has continued unabated since the early 1990s. By July 2005, a total of 330 had been notified to the WTO (and its pred- ecessor, GATT). Of these: 206 were notified after the WTO was created in January 1995; 180 are currently in force; several others are believed to be operational although not yet notified. One of the most frequently asked questions is whether these regional groups help or hinder the WTO’s multilateral trading system. A committee is keeping an eye on developments. 63 Regional trading arrangements They seem to be contraditory, but often regional trade agreements can actually sup- port the WTO’s multilateral trading system. Regional agreements have allowed groups of countries to negotiate rules and commitments that go beyond what was possible at the time multilaterally. In turn, some of these rules have paved the way for agreement in the WTO. Services, intellectual property, environmental standards, investment and competition policies are all issues that were raised in regional nego- tiations and later developed into agreements or topics of discussion in the WTO. The groupings that are important for the WTO are those that abolish or reduce bar- riers on trade within the group. The WTO agreements recognize that regional arrangements and closer economic integration can benefit countries. It also recog- nizes that under some circumstances regional trading arrangements could hurt the trade interests of other countries. Normally, setting up a customs union or free trade area would violate the WTO’s principle of equal treatment for all trading partners (“most-favoured-nation”). But GATT’s Article 24 allows regional trading arrange- ments to be set up as a special exception, provided certain strict criteria are met. In particular, the arrangements should help trade flow more freely among the coun- tries in the group without barriers being raised on trade with the outside world. In other words, regional integration should complement the multilateral trading sys- tem and not threaten it. Article 24 says if a free trade area or customs union is created, duties and other trade barriers should be reduced or removed on substantially all sectors of trade in the group. Non-members should not find trade with the group any more restrictive than before the group was set up. Similarly, Article 5 of the General Agreement on Trade in Services provides for eco- nomic integration agreements in services. Other provisions in the WTO agreements allow developing countries to enter into regional or global agreements that include the reduction or elimination of tariffs and non-tariff barriers on trade among themselves. On 6 February 1996, the WTO General Council created the Regional Trade Agreements Committee. Its purpose is to examine regional groups and to assess whether they are consistent with WTO rules. The committee is also examining how regional arrangements might affect the multilateral trading system, and what the relation- ship between regional and multilateral arrangements might be. ON THE WEBSITE: www.wto.org > trade topics > goods > regional trade agreements > See also Doha Agenda negotiations 64 2. The environment: a specific concern ‘Green’ provisions The WTO has no specific agreement dealing with the environment. However, the Examples of provisions in the WTO agree- ments dealing with environmental issues WTO agreements confirm governments’ right to protect the environment, provided • GATT Article 20: policies affecting trade in certain conditions are met, and a number of them include provisions dealing with goods for protecting human, animal or environmental concerns. The objectives of sustainable development and environ- plant life or health are exempt from mental protection are important enough to be stated in the preamble to the normal GATT disciplines under certain Agreement Establishing the WTO. conditions. • Technical Barriers to Trade (i.e. product The increased emphasis on environmental policies is relatively recent in the 60-year and industrial standards), and Sanitary history of the multilateral trading system. At the end of the Uruguay Round in 1994, and Phytosanitary Measures (animal and trade ministers from participating countries decided to begin a comprehensive plant health and hygiene): explicit recognition of environmental objectives. work programme on trade and environment in the WTO. They created the Trade • Agriculture: environmental programmes and Environment Committee. This has brought environmental and sustainable exempt from cuts in subsidies development issues into the mainstream of WTO work. The 2001 Doha Ministerial • Subsidies and Countervail: allows subsi- Conference kicked off negotiations in some aspects of the subject. dies, up to 20% of firms’ costs, for adapting to new environmental laws. > See also Doha Agenda negotiations • Intellectual property: governments can refuse to issue patents that threaten The committee: broad-based responsibility human, animal or plant life or health, or risk serious damage to the environment The committee has a broad-based responsibility covering all areas of the multila- (TRIPS Article 27). teral trading system — goods, services and intellectual property. Its duties are to • GATS Article 14: policies affecting trade study the relationship between trade and the environment, and to make recom- in services for protecting human, animal or plant life or health are exempt from mendations about any changes that might be needed in the trade agreements. normal GATS disciplines under certain conditions. The committee’s work is based on two important principles: • The WTO is only competent to deal with trade. In other words, in environmental issues its only task is to study questions that arise when environmental policies have a significant impact on trade. The WTO is not an environmental agency. Its members do not want it to intervene in national or international environmental policies or to set environmental standards. Other agencies that specialize in envi- ronmental issues are better qualified to undertake those tasks. • If the committee does identify problems, its solutions must continue to uphold the principles of the WTO trading system. More generally WTO members are convinced that an open, equitable and non- discriminatory multilateral trading system has a key contribution to make to national and international efforts to better protect and conserve environmental resources and promote sustainable development. This was recognized in the results of the 1992 UN Conference on Environment and Development in Rio (the “Earth Summit”) and its 2002 successor, the World Summit on Sustainable Development in Johannesburg. The committee’s work programme focuses on 10 areas. Its agenda is driven by pro- posals from individual WTO members on issues of importance to them. The follow- ing sections outline some of the issues, and what the committee has concluded so far: 65 WTO and environmental agreements: how are they related? A key question If one country believes another country’s How do the WTO trading system and “green” trade measures relate to each other? trade damages the environment, what can What is the relationship between the WTO agreements and various international it do? Can it restrict the other country’s environmental agreements and conventions? trade? If it can, under what circumstances? At the moment, there are no definitive There are about 200 international agreements (outside the WTO) dealing with vari- legal interpretations, largely because the ous environmental issues currently in force. They are called multilateral environ- questions have not yet been tested in a mental agreements (MEAs). legal dispute either inside or outside the WTO. But the combined result of the WTO’s trade agreements and environmental About 20 of these include provisions that can affect trade: for example they ban agreements outside the WTO suggest: trade in certain products, or allow countries to restrict trade in certain circum- stances. Among them are the Montreal Protocol for the protection of the ozone 1. First, cooperate: The countries con-